Caspian Energy Inc.
TSX : CEK
AIM : CEK

February 06, 2006 16:00 ET

Caspian Energy To Raise US$16 Million Through Issue of Secured Convertible Debentures

TORONTO , ONTARIO--(CCNMatthews - Feb. 6, 2006) -

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, AUSTRALIA OR JAPAN

Caspian Energy Inc. ("Caspian" or the "Company")(TSX:CEK)(AIM:CEK), an oil and gas exploration company operating in Kazakhstan, today announces a proposed financing to raise US$16 million (the "Loan") through privately placed secured convertible debentures (the "Debentures").

The Debentures will bear interest at a rate of 10% per annum and mature 5 years plus 1 day from the date of issue.

The funds raised through the issuance of the Debentures will be used to complete the Company's second well, EZ#302, that was spudded on 25 December 2005, and drill and complete EZ #303. The funds will also provide the finances for the "acid fracs" of three wells in East Zhagabulak and provide general working capital.

Caspian has begun to acidize the exploration well EZ#301. The acid work and testing is expected to be concluded in one to two weeks.

Details of the Placing

The holders of the Debentures may convert the principal amount of the Debentures, in whole or in part (but subject to a minimum conversion of US$0.25 million) and at any time and from time to time, into common shares of the Company at a conversion price of Cdn$2.45 per share (the "Conversion Price"). The Conversion Price will be subject to adjustment under certain circumstances, including in the event that Caspian completes an offering of securities at a price per common share or having an exercise price or conversion price per common share below the Conversion Price.

At any time after the second anniversary of their date of issue, the Company may repay the principal amount of the Debentures, in whole or in part (but subject to a minimum repayment of US$1 million), or require conversion of the principal amount of the Debentures, in whole or in part (but subject to a minimum conversion of US$0.25 million), into common shares of the Company at a conversion price of Cdn$2.45 per share if the volume-weighted average trading price of the common shares on the Toronto Stock Exchange (the "TSX") for the 40 consecutive trading days immediately prior to the issue of a written notice of conversion by Caspian is at least Cdn$4.08 and the common shares issuable on the conversion are issued within 5 trading days of the date of the written notice of conversion.

Capitalized and accrued but unpaid interest will be convertible at a conversion price to be determined at the time of conversion in accordance with the rules of the TSX and subject to TSX approval, which conversion price will be the Conversion Price or such greater price as may be required by the TSX.

The Debentures will be secured by a general charge over the Company's assets and a pledge of the shares of its subsidiary.

Completion of the financing is subject to the approval of the TSX and certain other customary closing conditions.

Notes to Editors

Caspian's principal assets are a 50% indirect interest in Aral Petroleum Capital LLP ("Aral"), held by Caspian Ltd., and a temporary 100% beneficial interest in the currently producing well of Aral. Through its interest in Aral, Caspian has the right to explore and develop certain oil and gas properties in Kazakhstan, known as the North Block, a 3,458 square kilometre area located in the vicinity of the Kazakh pre-Caspian basin. The Company also has minor resource interests in Canada.

CAUTIONARY NOTE

Certain statements contained in this press release constitute forward-looking statements. Forward-looking statements relate to future events or the Company's future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements in this press release include, but are not limited to, statements with respect to: the performance characteristics of the Company's oil and natural gas properties; drilling plans and the timing and location thereof; plans for the exploration and development of the North Block; plans for acid work and testing; the use of proceeds from the issue of the Debentures; the closing of the financing; and capital expenditure programs.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and readers are cautioned not to place undue reliance on forward-looking statements contained in this press release. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this press release include, but are not limited to: volatility of oil and natural gas prices; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; geological, technical, drilling and processing problems; drilling and testing results, fluctuations in currency and interest rates; product supply and demand; risks inherent in the Company's foreign operations; changes in environmental and other regulations or the interpretation of such regulations; political and economic conditions in the Republic of Kazakhstan; the possibility that the financing will not close, and the other factors discussed in this press release and in the Company's filings with Canadian securities regulatory authorities which are available to the public at www.sedar.com.

Contact Information

  • Bell Pottinger Corporate & Financial
    Ann-marie Wilkinson/Geoff Callow
    00 44 (0) 20 7861 3232